Home / News & Reviews / What is Cryptocurrency

What is Cryptocurrency

Cryptocurrency is a digital asset designed to work as a medium of exchange of assets or money. It uses cryptography to secure the tansactions and to control the creation of additional units of the currency.

  This essentially means that through principals of cryptography electricity is converted into lines of code that gain monetary value.

cryptocurrency

                  Mining of coins

Most cryptocurrencies are designed to decrease in production in order to avoid inflation.

Early cryptocurrencies:

  • The very first cryptocurrency was Bitcoin and was released in 2009- Now its the biggest and most popular currency.
  • After bitcoin there were other released including Litecoin and Namecoin released in 2011 and followed by Peercoin in 2012.
  • Others followed and they were incorporating some unique features- for example Gridcoin with computing power contribution, Omni with first communication protocol or Burst with first smart controls also called crypto 2.0.

Magic Book analogy:

Imagine there is magic book and everyone in the world have access to that magic book. Everyone can also write into that vook. If you write something in the book, it appears almost instantly to everyone having access to that book.Also nobody can delete anything from that book.

So if I write I give Hannah 1 bitcoin and I own 1 bitcoin, it means that now Hannah will get 1 bitcoin and I will lose 1 bitcoin. Everyone having access to the magic book can check that. With something called ‘Smart contracts’ we can add conditions in the book. So I can write I give Hannah 1 Etherem if it rains in 11th of july 2017 in Pakistan and if it happens, I lose 1 Ethereum and Hannah gets 1 Ethereum.

Smart Contracts:

First of all Burstcoin implemented it in 2015. Smart contracts enable many things to be run on the blockchain which would otherwise have to be individually programmed in.

They can include a variety of functions like predictions, auctions, crowdfunding, lotteries and many many more. Popularized by Ethereum blockchain in platform- Ethereum quickly gained popularity and became second biggest cryptocurrency.

Smart contracts 2.0 are gaining massive traction with several alternatives to Ethereum being available including(but not limited to):

  • Counterparty
  • Burst
  • Ubiq
  • Waves
  • NEO
  • Bitshares
  • Stratis
  • Lisk

Acquisition:

Main cryptocurrencies like nitcoin or ethereum can be purchased with fiat money through services like coinbase, kraken, Gemini or others. You usually have to provide some form of identification to use these services(to protect from fraud) and after you do that you can either use your debit/credit or bank transfer to buy.

Those services allow you to sell your cryptocurrencies for fiat. Less popular cryptocurrencies have to be traded for bitcoin or eretheum via exchanges like poloniex, Bittrex, Liqui or others.

Storage:

  • Cryptocurrcies can be stored on the exchanges, it is not recommended however to do this long term
  • Ideally you want to get your own wallet. There are many wallets available- some of them are crypto specific while other can store several cryptocurrencies at once
  • There are also diiferent types of wallets including online wallets, desktop, mobile wallets and paper wallets- each have advantages and disadvantages.

Future of Cryptocurrency:

Cryptocurrencies are still at a very early stage of development with plenty of room to grow. All cryptos together are worth around 80 billion USD(for reference Apple alone is worth 10 times as much). There are also new exciting developments in the sector often called cryptocurrency 3.0- we don’t really know what will be the next big thing that could be called 3.0.

Speculation:

  • IOTA– using tangle ledger is able to settle instant transactions with zero fees.
  • Tezos– self governing blockchain that rewards protocol development.
  • EOS– blockchain operating system designed to support commercial decentralized application.

 

 

About Zahoor Ahmad